ESOP Planning & Consulting Facts
An employee stock ownership plan (ESOP) is essentially a retirement plan which helps employees obtain ownership of the company. If you’re a privately held business owner considering succession planning, ESOPs can be great options. If you are thinking about moving forward with an ESOP, there are two things that you need to consider to make an educated decision: company culture and a feasibility report.
Are your employees empowered? Do they have an entrepreneurial personality? These are some of the questions you have to ask yourself to see if an ESOP is a good fit for you.
Feasibility studies can help you to outline your goals, ensure there is proper financing, and to check for adequate cash flow, among other things.
After analyzing both components, you will be able to make an educated decision on whether or not an ESOP would be appropriate for your company.
As of 2018, the National Center for Employee Ownership (NCEO) estimates there are:
- Almost 7,000 ESOPs covering more than 14 million employees
- About 2,000 profit sharing and stock bonus plans that are heavily invested in company stock and are like ESOPs in other ways
- Roughly nine million employees that participate in plans that provide stock options or other individual equity to most or all employees
- Approximately 28 million employees that participate in an employee ownership plan
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